Jo DiNapoli – professional trader, President of Coast Investment Software, Inc." Although its methods are applicable on all time scales and in all liquid markets, DiNapoli prefers intraday trading on the stock market indices most of all. He started trading them ever since, how the index S was introduced&P in 1982.
Joe DiNapoli – professional trader and trading veteran with over 35 years of market experience. He is also an avid researcher, an internationally recognized lecturer and well-known author. His formal education is related to electrical engineering and economics. His informal education was in the "Bunker", the so-called trading place, fully equipped with electronics and communication equipment, where most of Joe's early research began. Trader Joe - this is how he signs letters and this is the name of his friends and students, who operate in a wide variety of countries and markets.
Joe DiNapoli's Comprehensive Research on Displaced Moving Averages, creating your own “Predictive Oscillator”, and in particular his practical and unique method of applying the Fibonacci ratio to the price axis, make him one of the most outstanding experts today. DiNapoli taught his methods in the main financial capitals of Europe and Asia, just like in the United States. Only in 1996 G. Joe DiNapoli taught his methods to listeners in more than 23 financial centers around the globe. His articles have appeared in a variety of technical analysis publications in different countries around the world.. Joe DiNapoli co-wrote Books “The tops of futures trading, lessons of masters ”in 1990 year, which was recognized as the book of the year. His most significant work to this day is the book "Trading Using DiNapoli Levels", which has become the standard for students in Fibonacci trading methods.
When Chuck Lebeo (”Technical Traders Bulletin”) asked my readers for the names of successful traders, whom they would most like to interview, the name Joe DiNapoli sounded most often. Joe DiNapoli is one of America's most popular professional traders. This was facilitated not only by his apt statements, but also accurate market predictions, especially in relation to stock market indices and interest rate futures, as well as the author's development of DiNapoli. Likewise, the Atlanta Constitution quoted DiNapoli's work, referring to the "magic power" of Fibonacci ratios in the market, Joe has used this magic over and over again on national television., to make amazing and amazingly accurate market predictions, especially for stock market indices and futures interest rates.
As President of Coast Investment Software Inc., located in Sarasota, Florida, Joe DiNapoli continues to develop "high precision" trading methods, using combinations of leading and lagging indicators in unique and innovative ways. He runs a limited number of private training programs each year in his trading room and also makes his trading methods available to others through trading software and training materials.. Nevertheless, part of DiNapoli's trading methods, as he states in his book "Trading Using DiNapoli Levels", - not amenable to programming. This book became a bestseller in the United States.. In Moscow, his seminar was attended by about 200 human. Joe DiNapoli's suggestion to write an article on his analysis methods, he responded from Hong Kong, where he held the next seminar:
“My methods work well for more than just futures, but also in foreign exchange markets. I hope to visit your wonderful and unique country again soon.. Reception, which I was provided in Moscow, and that interest and an incredible thirst for knowledge, which I saw from traders in Russia, were just stunning. I would like to think, that it was a reaction to those trading methods, what i tried to convey. Maybe, this is due to the accuracy of the developed by me and, as i think, advanced trading techniques for using Fibonacci levels, predefined entry points, placing stops and target levels of profit withdrawal. In many countries around the world, I have been asked for the rights to reprint the book, but - largely due to this interest of Russian traders - the translation into Russian is the only one to this day. I hope, that my article in the journal "Currency Speculator" will increase your competence in technical analysis, much needed in difficult and volatile markets, on which a modern trader has to work today.
If the article is not enough, but interest will remain, - then read the book. If this is not enough, revenue per seminar, i am counting in march 2002 to spend it in Moscow ".
Joe, what role does psychology play in your trading?? Was it so, that you were losing control of your trade? What advice can you give to novice traders in this case??
You cannot be a successful trader without appropriate psychological training.. You're asking, have i made mistakes, losing control of myself. Undoubtedly, Yes! I like to repeat one of the definitions of a professional trader - a person, which makes fewer mistakes, than newbie. I do not define success or failure in any particular trade by the amount of income received., and after that, how well the trader is following his trading plan. That means, that it is possible to conduct several unprofitable transactions and at the same time have a completely successful trading result. It is this approach that allows you to bring the final result to a win. This is why the newbie, spending his time hoping to learn how to trade correctly, and turns into a professional trader. You can always achieve a profitable result, if you use a carefully designed trading plan. But you will never be able to achieve a consistently profitable result without self-discipline and following a trading plan.. I would advise all novice traders to learn to understand the difference between knowledgeable speculation and gambling.. A knowledgeable speculator always takes money from the player after some time. Always and at all times! Tem, who doesn't understand, I'll say it again: always!
There is a lot of talk about day trading today.. How do you feel about him? And on what scale is it wiser to start trading?
Day trading is much more difficult, than positional trading. He "squeezes" time for making decisions. Traders, not yet able to apply a detailed trading plan, make mistakes under stress. This tactic leads to disaster.. With sufficient experience and the right tools, I must emphasize, that these tools provide a highly profitable result. However, I would advise novice traders to first learn how to make a profit on the results of the closing of trading sessions., say, within six months or a year, and only then proceed to day trading.
Time interval, which gives the best results with the appropriate experience and trading tools, depends entirely on the psychology of a particular trader. Everything is very individual. Some people have much better, compared to others, ability to trade on 5-minute charts, while others do better on monthly charts. Finding the right time frame for you is a critical parameter for self-discipline.. I trade on any time frame, but I already have 30 years of experience!
Your relationship to mechanical systems. Is everything in trade amenable to programming??
I devoted the first chapter of my book “Trading at DiNapoli Levels” to a discussion of mechanical trading systems versus analytical solutions.. Analytical trading is very difficult, requires tremendous concentration and self-discipline, although it can lead to an incredibly favorable profit / loss ratio. Mechanical trading systems, usually, have a low percentage of winning trades. They usually look good on paper., but not in practice. In my approach, approximately 80% action based on mechanical methods, and 20% - at analytical. This combination of the two systems gives me the best results.. At the same time, I would like to draw your attention to the following paradox: the more you can mechanize, reduce to a mechanistic method, even if you trade solely based on analytical methods, - the better for you.
One of the secrets of analytical trading is to implement as much as possible mechanically.
Who are your friends and why?
Almost all my friends are traders. These are the people, qualities I admire. Traders know how to take responsibility for their decisions. I think this is important for life in general., and for trading - especially. The trader lives or dies by his own decision. He is a real man (certainly, there are real women). Instead of, to complain, that this or that system is bad, traders will find the system, which will work for them. Instead of, to whine, that this or that broker bad, a trader will find a good broker. I do not speak, that there can be some kind of discontent or outburst of emotions, I myself am not ideal in this regard, but this is not the main feature. Traders are motivated people, they spend the necessary time education, and then they do, what brings results.
I wrote two articles, dedicated to Robert Krause, because I like his methods and the Fibonacci Trader program. You also mentioned him in your book. Both of you are using Fibonacci levels. What are the similarities and differences between your approaches?
Robert attended my Fibonacci workshops back in 1988 year. This was before his publications on Fibonacci levels. He's a good man. Out of respect for me, he did not include my methods in his software development., nor in their descriptions in the presentations. His methods are vastly different from mine., but, I think, any attempt to characterize these differences would be inappropriate, insofar as, as you understand, our programs compete in the market.
What markets do you prefer today?
In fact, I always work there, where is the easiest place to make money. Unless you reproach me with moral standards (just for the duration of this interview, and only the market i mean!), then I prefer to take money from the deaf to a greater extent, dumb, blind, crippled and hopeless, than the strong and the rich. Methods, described in general terms in my article and mainly in the book, will help you find losers who are always present on the market without knowledge and experience and take everything, what they have. It may sound unkind, but I prefer to be a vulture and feed on carrion, than attack the living. Knowledge in general and the ability to apply knowledge is something, what separates the two types, winners and losers. I – trader and trade on forex (forex). I trade stock indices. I trade commodities. I trade stocks. I trade mutual funds. Sometimes I trade options, Really, not very often.
What Trader Joe has to say about risk management?
Can't say much. I have taught a trading course for many years. Over three hours of this course with a lot of graphic material was devoted to personal management, risk and cash management. Obviously, it was of some value to novice traders, but I have often heard from experts, professional money managers, that this information was important to them too. The trader must understand, that in certain circumstances it makes sense to risk a large amount, than the potential gain. In other cases, it makes sense to enter trades several times., until one of the entries is profitable. This is a big topic., and I, Unfortunately, within the framework of our interview I can not go into details in detail. See catastrophe theory or gambling theory. Courses, which I read, given in my other books, That, maybe, available to the Russian reader. These books also describe that, what is called "pending bidding".
Many Russian traders are already working or are going to work in the American markets. What can we expect next year? What, In your opinion, the most likely scenario for the development of the situation?
Expect losses, as the American markets are some of the most difficult. The competition is extremely high, and any trader, be it Russian or American, you need to have maximum experience, knowledge and reliable tools. Besides, I can tell, that markets will bounce up and down. I don't want to seem frivolous. Frankly speaking, does not matter, what Joe DiNapoli or other experts say, although my expectations were, and even now they are very gloomy.
What matters is, what the methods say, when you enter the market, and what the methods say on that time interval, where you work. We have client pages, available topics, who buys software products directly from us, or those, who buys time on these pages to view our predictions. These pages are not about, where can you break the bank, not about market directions. They are, rather, are educational for people, who want to get acquainted with my methodology. We're talking about market direction, when we see something important or when we apply methods, which we teach.
Trading Methods.
Question: You are welcome, briefly tell, what are you doing, how long have you been trading in the markets, etc., to give readers a little information about themselves.
Joe DiNapoli: Seems, that somehow, I've been involved in trading my whole life. IN 1967 I graduated from a technical college and started trading seriously. In those days, I dealt with low capitalized, small emissions, where are you losing 15-25% only on spread. We used these "promotions", which were used in the credit union of the company, where i worked. In those days, I was also involved in options trading. This is before, how they were listed, as it is today. I have been involved in trading commodity contracts since 1980. I love commodity markets. If you can develop strategies, to deal effectively with risk, the benefits of this market far outweigh other markets. Around 1986. I started performing in front of an audience, originally with Jake Bernstein, at the international symposium on futures. That's when I started public speaking. I've performed all over the world, in major centers in Asia, Europe and the Middle East. Only in 1996. I performed in 22 various countries. It was too much, but I couldn't pass up the opportunity to perform in places like Tallinn, Saint Petersburg and Bombay. I have met fantastic people all over the world.
Question: Tell us a little about your trading style?
Joe DiNapoli: Trading Methods, which i use, differ significantly from those used by other people. I mix leading and lagging indicators and interact with prices, based on this approach. I use some lagging indicators like displaced moving averages and a combination of MACD and Stochastic to determine the trend.. As soon as I am trending, I use Fibonacci analysis as a leading indicator, to position within this trend. The last step is to take a logical profit target.. These profit targets are calculated using some of the Fibonacci methods.. This approach is my own, since i wasted a lot of time, developing it. I use displaced moving averages, for example, in a very specific and unique manner. I think, that I really did my homework in this one alone, spending about 3 years of research in the early 80s. Mid 80s, i spent another three years, identifying the most efficient way to use Fibonacci methods. I think, that i did a good job, separating the best from the good or the average. Sometimes it is not a matter of developing a new indicator., but the question of using an existing indicator in a more efficient manner.
Question: You can give an example of this, what do you mean by using an existing indicator in a more efficient way?
Joe DiNapoli: OK, let's take Moving Averages. Instead of, to use standard moving averages, i use displaced moving averages. Actually, in the mid 80s, when i started talking about it, there were no computer programs for this, as far as I know, apart from our own, which moves the moving averages. Before, some people used the opening price, instead of closing for moving averages, so, so they can know, what was the value of the moving average before the end of the day. When you move the moving average, let's say for five days, Do you know, what value of the Moving Average should be by the end of five days. There was no other reason to use the discovery anymore. Unfortunately, many of the graphics programs, who move the moving averages today, do not show the price activity of the last days. This is an example of trading software, created by programmers, and not by traders.
Question: What are your profit goals, and whether you have a long or short term perspective?
Joe DiNapoli: My profit targets are a function of the time period, in which I trade. Weekly goals are much bigger, than goals, calculated on a five-minute schedule. Calculation methods, but, the same. If there is only one thing, which a trader can do, to significantly improve your win-to-loss ratio, that is – consistent use of logical profit targets in your trading plan.
Question: How about damages, what is your risk limit?
Joe DiNapoli: I have a very low risk limit. I once heard of futures trading, described as manipulating dynamite. This is not a bad definition. That, what should you get used to using – it is to manage greed, so that you can realize consistent profits! For various reasons, most people cannot do this..
Question: What steps are you taking, to control losses?
Joe DiNapoli: Fibonacci analysis, along with my trend indicators clearly tell me, if i'm wrong and have to get out of the trade. When it happens, I am exiting the market or looking for exit opportunities.
Question: Please describe your best and worst deals, which you did?
Joe DiNapoli: Hot uninformed recommendations – this is the worst. They often come from organizations, who are trying to get commissions or have positions in the instrument, on which recommendations are made. Trading situations, which meet my criteria, are the best and most profitable deals.
Question: What makes you competitive in the market?
Joe DiNapoli: An experience, management and excellent trading approach.
Question: Everyone is familiar with the old principle of “cut your losses and let your profits grow”. Many traders have difficulty deciding, when to fix your profit, sometimes letting profits turn into losses. What are you using, to make a decision to close a position?
Joe DiNapoli: I don't do that. My profit only grows up to the pre-calculated target. This does not imply, that I never have distant goals, it all depends on my time period, in which I trade. I don't cut my losses – the market does it, overcoming a pre-calculated level or indicator. I exit the market the same way, how would i get off the street, if a truck was driving me. The whole question is whether there are criteria, to see the truck, then experience and discipline, to act accordingly.
Question: What advice can you give to those, who is just starting to trade? What can be done, to reduce time and waste, which are usually required during training?
Joe DiNapoli: People, trying to make a profit in this game, face many challenges. I would recommend, so they look for traders, who know that, what they do and have the ability to explain, what are they doing, others. There is a real educational problem.
Question: If you were to find the perfect deal, how would it look? You are welcome, describe, what is necessary, to build the perfect deal?
Joe DiNapoli: I will have to answer this question in general terms., since most are not familiar with certain aspects and nuances of my approach to trading. Transactions must meet the following criteria: I have been using this approach continuously for many years.. I buy on a downtrend downtrend and sell on a downtrend retracement. Lagging indicators allow me to spot the trend. Leading indicators, primarily Fibonacci analysis, allow me to "safely" rank within this trend. I use Logical Profit Goals all the time and I have oscillators, which are used as filters, to keep me from stepping in the direction of the trend, when it's too dangerous. I also have approximately 8 trading patterns or conditions, which act, to give me market direction. If they are in conflict with trend analysis, then i always follow that, what models tell me.
Question: What markets do you trade?
Joe DiNapoli: In the markets, that move and fit the situation, when can you make money. IN 1995 year one of my biggest deals was in the soybean market. I have not traded in the food market for over ten years. But the market conditions were perfect, and I played on this.
Question: This would be acceptable for mutual funds?
Joe DiNapoli: Unqualified answer – Yes, but there may be some difficulties. Let's say, you trade foreign treasury bonds. Fund managers can be involved with specific hedging, what can affect the price in this way, that Fibonacci analysis will not be as accurate, how would he be, if you had a pure trade. Generally, but, Fibonacci analysis works very well in mutual funds.
Question: Your system is mechanical?
Joe DiNapoli: Not, but the secret to making a good subjective system is, to make it as much as possible not subjective.
Question: How do you calculate your profit target?
Joe DiNapoli: I am using one or both of the two methods. The first is Fibonacci analysis. I also use the Predictive Oscillator.
Question: What is the percentage of profitability and percentage of losses, are usual for your transactions?
Joe DiNapoli: It depends on the volatility and time frame of the market used..
Question: What displaced moving averages are you using? For which markets?
Joe DiNapoli: I use the same displaced moving averages for all markets. One of the methods, allowing to say, that something works well is to determine if it works for different markets. Otherwise, you find yourself in a kind of "swamp", burying so many new tech traders. I am using 3 × 3, 7×5, 25× 5 displaced moving averages. They all – simple moving averages from closing prices. Second parameter – this is the offset value.
Question: These moving averages are acceptable for long term traders. (daytime charts)?
Joe DiNapoli: Yes, in fact I use displaced moving averages for daily, weekly and monthly charts. I use a combination of MACD and Stochastic for intraday as well as daily, weekly and monthly charts.
Question: You trade other people's money?
Joe DiNapoli: Not, it is not interesting for me.
Question: What's the worst monthly decline, which you experienced last year?
Joe DiNapoli: This is classified information, but it was not something serious.
Question: You can tell us your win / loss ratio?
Joe DiNapoli: For some reason I am reserved, to give exact numbers, but I will say, that consistent and correct adherence to this methodology can result from 70 to 90% winning trades. Some of the reasons, thanks to which you can get such a good ratio, apply to exit criteria in the same way, as well as profit goals. Let's say, the psychological level of stopping is violated. Instead of, to exit the market and be a loser, you can develop a series of Fibonacci retracements and exit at a much more favorable point. This can turn small losses into small profits or a breakeven trade..
Question: Your methods are published somewhere?
Joe DiNapoli: I teach trading courses. There, any listener can get any information of interest to him.. Hope, we will publish the book later this year.
Below are some of the questions, which listeners most often asked Joe during his lectures.
Question: How Sensitive is Fibonacci Analysis for Precise Top or Bottom Selection? You can use this to trade options or they are too volatile?
Joe DiNapoli: Fibonacci analysis is the most accurate means of predicting support and resistance, which only exists. but, you must use Fibonacci analysis in the correct context. In my opinion, it is essential for options trading, since you have to deal with additional expansion and contraction. The bottom line is, what if you don't know ahead of time, where support and resistance will show itself, then nothing good will come of options trading.
Question: You can explain in more detail, how the value of the displaced moving average is determined?
Joe DiNapoli: Displaced Moving Average – this is the moving average, advanced in time. Imagine, that you have a 7-day simple moving average, now move it to the right by 5 days. As a result, you get a 7X5 displaced moving average. The value of the displaced moving average for today is equal to the value of the non-moved moving average 5 days ago.
Question: How about, to enter the market, which is in a strong trend without a correction to Fibonacci levels, like the current Swiss franc market (question asked 19 February 2004)
Joe DiNapoli: One of the biggest advantages of the methods, which i use, lies in their ability to put you in strong motion with relative safety. You achieve it, reducing your time format, creating a series of Fibonacci supports and buying above the crossover. Your stop order is below the lowest crossover point.
Question: Your analysis, seems, focuses on one price. You are using Fibonacci on the time axis?
Joe DiNapoli: I do not use Fibonacci analysis on the time axis, although i did a lot of research on this topic. Yes, there is a context, in which Fibonacci analysis should be applied. Out of this context, you step on thin ice.
Question: Do you have any methods, thanks to which you are trying to predict the price activity of the next day, based on today's price activity?
Joe DiNapoli: Not just from today's price action. I guess, that learning larger time formats is necessary for maximum security, so I usually use price activity more, than one day, to define goals. Around 1982. I came up with an interesting indicator, named Predictive Oscillator (Oscillator Predictor). This indicator looks back at 6 Months, uses detrend oscillator, to predict overbought and oversold levels for tomorrow's action.
Question: How about adding to a losing position, to average?
Joe DiNapoli: Some of the traders, who was worth approximately a billion dollars, once said, that he is not rich enough, to average.
Question: Could you say a few words about money management?
Joe DiNapoli: money management – this is a big topic, which I spend about three hours on in my trading courses. It's much more complicated, than risking two or five percent of your trading capital in one trade. You must understand the theory of the crash – this is the theory of gambling, periods of delusion and much more. This information is hard to find. For many years I have taught the rule of three periods. This implies, that you have a good trading methodology. If you are not in profit after three periods, then you get out of the trade. These are three days on the daily chart, fifteen minutes on a five-minute chart, etc.. One last comment regarding your question. If you learn, how to buy and sell in the right places, then there will be a lot of competition for the execution of orders in these areas. In this sense, things really get harder, when you get better.
